Bankers' earnings surge towards pre-crash levels

Pay and bonuses in the City are surging back to their pre-crash levels despite widespread criticism of the Square Mile and the banking industry, which was rescued by the taxpayer 18 months ago.

The steep rise in earnings is likely to put pressure on the coalition government to impose a clampdown on City pay practices, which the Liberal Democrats in particular attacked while in opposition.

Guardian analysis of data from the Office for National Statistics shows that bankers were paid £8.5bn in bonuses in the four months to April, compared with £7bn during the same period last year.

There was also a jump in pay across the industry of £1bn to £12bn as bankers shifted some of their earnings away from bonuses to avoid the former Labour government's bonus tax.

The result of the pay and bonus increases took the combined earnings for the bonus season to £20.5bn compared with £24bn at the height of the boom in 2007.

Investment banks traditionally pay staff bonuses in the run-up to the end of the tax year in April. For the last three years the Guardian has analysed ONS pay data to show how bonuses make up a large proportion of City pay. In many instances rewards amount to millions of pounds compared to an average of almost £7,000 across the industry.

Last year Vince Cable, now the business secretary in the new administration, said the City had shown "a complete lack of awareness of the extent of the financial crisis, their role in creating it and the extent to which they are ultimately answerable to the taxpayer".

Lib Dem peer Lord Oakeshott said of the new data tonight: "This is the unacceptable face of capitalism. The coalition agreement promised to bring forward proposals for robust action to tackle these practices."

A spokesman for the British Bankers Association said the bulk of workers in the industry received on small bonuses or no bonus at all. "For those who do receive a bonus, this is based on their contribution to the business during the year," he said. "The financial services sector makes a huge contribution to the UK economy and to keep that world-leading position you have to employ the best people – and that means paying a competitive remuneration package."

Recruitment consultants in the City report that appointments has gained speed in recent months as investment banks poach staff from their rivals.

One consultant said the demand for staff had increased in recent months in response to the return of mergers and acquisitions and major fundraising exercises by major corporations.

Senior back-office staff can also command high salaries and bonuses after redundancies last year left a shortage of experienced workers. More than 60,000 staff left the industry after the crash.

While Royal Bank of Scotland has continued to cut its workforce, it has insisted on paying bonuses to staff in its investment banking division. Stephen Hester, the bank's chief executive, has lobbied ministers to protect bonus payments, which he argued prevented experienced staff from leaving to join rival banks.